- GBP/USD witnesses a strong continuation of selling and falls to an almost two-week low.
- Bullish-tongued remarks from Fed Chairman Jerome Powell buoyed the dollar and put downward pressure on the pair.
- Bank of England Governor Andrew Bailey’s comments did not impress bulls or lend support to the pair.
The pair GBP/USD extends the previous day’s heavy losses and remains under intense selling pressure for the second day in a row on Wednesday. The downward movement has accelerated at the beginning of the American session and has led the pair up to the 1.2100 areaat a low of almost two weeks.
The US dollar attracted some buying in reaction to Fed Chairman Jerome Powell’s remarks and soared to its highest level since June 17. This, in turn, put downward pressure on the GBP/USD pair. In his speech at the ECB Forum in Sintra, Powell reaffirmed expectations for more aggressive rate hikes and said the US economy is well positioned to handle tougher policy..
Powell further added that the Fed remains focused on bringing inflation under control and that the market price is quite close to the “dot chart”. In contrast, the Governor of the Bank of England, Andrew Bailey, was cautious, noting that there were clear signs that the economy is slowing. “We’re getting hit with a very large real income shock,” Bailey added.
Bailey also said that it is very difficult to separate the effects of Brexit from covid. This suggested that the BoE would opt for a more gradual approach to raising interest rates, which in turn weighed on the British pound. However, Bailey affirmed that it will be necessary to act with more force if inflation persists and the situation leaves options on the table.
Aside from this, falling US Treasury yields coupled with a generally positive tone around US stock markets could cap gains for the safe-haven dollar and limit the deepest losses for the GBP/USD pair. That said, a sustained weakness below the 1.2100 round level would be seen as a new trigger for the bears and would set the stage for a further move lower.
GBP/USD technical levels
Source: Fx Street
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